Real Estate Deals Gone Wrong: 5 Common Issues That Lead to Litigation

Real estate transactions are one of the largest financial commitments most people will make in their lives, and it is normal to want everything to go smoothly. Whether you are a buyer, seller, or real estate professional, understanding where transactions commonly break down is the first step toward protecting everyone’s interests and avoiding potential litigation. Here are five frequent issues that turn real estate deals into courtroom disputes.

1. Misrepresentation and Non-Disclosure

Sellers in British Columbia must provide a completed Property Disclosure Statement (PDS) covering any known issues about the property. Most PDS’s are incorporated into the standard purchase and sale agreement. A seller is not required to warrant a certain condition of the property but does have to put prospective purchasers on notice of any known problems with the property.  Any omissions or inaccurate information can expose sellers to significant liability. Sellers should ensure they have carefully completed the PDS. Hidden defects, undisclosed oil tanks, contamination, or unapproved renovations are common issues. Buyers should always conduct thorough inspections and raise any concerns with the PDS before completing the deal.

2. Financing Challenges

Financing property transactions can be complex. Buyers who misunderstand their mortgage terms, miss deadlines, or overestimate their financing can lose their deposit or face contract termination. Sellers should also be careful when accepting offers with uncertain financing.

3. Title Issues

Clean title is key in property transactions. Common issues with titles include undisclosed liens, easements, restrictive covenants, and boundary disputes, which can derail a closing or surface after the fact and result in litigation. One way to reduce the risk of title issues is by obtaining title insurance.

4. Zoning and Land Use

If you are planning to build, renovate, or add rental units after the purchase, you should confirm that those plans comply with local zoning bylaws before completing a purchase. As well, sellers who fail to disclose known zoning violations at the time of the sale may face misrepresentation claims.

5. Deposit Disputes and Failed Completions

When deals collapse, the deposit is often the first contentious issue. Disputes turn on who caused the failure, whether conditions were properly satisfied, and whether parties acted in good faith, with the seller arguing the deposit is forfeited, and the buyer arguing the deposit should be returned. Where the property transaction fails, the innocent party may pursue damages (monetary compensation for the failed closing) or specific performance (forcing the completion of the sale).

Whether you are navigating a purchase or sale, having experienced legal counsel involved early can help you identify risks before they become problems. If a transaction has already gone sideways, understanding your rights and options is crucial.

If you have questions about this or other commercial litigation matters, please get in touch with Kristina Davies, Nicola Virk or another member of our Commercial Litigation team. For more blog posts, click here.